If you are a beginner, keep reading to learn about key aspects to consider when deciding on a trading strategy.
What is Intra-day Trading?
Intraday traders do not retain positions overnight, instead buying and selling on the same day. This trading method capitalises on short-term market swings in the price of an asset and all positions are closed within the same trading day. This method can be difficult for novices because they may lack strong technical abilities.
What is Long term investment?
This entails holding on to your investment for months, if not years. Rather than selling quickly, this is a buy-and-hold strategy. Before making an investment decision, you should conduct an extensive study of a company’s financial record.
The decision to become a long-term investor or an intraday trader is influenced by the individual’s talents, investing goals, personality factors, and so on.
Time commitment
Intraday traders must devote at least 2-3 hours per day. Long-term investors, on the other hand, must devote significant effort to researching the company. Because day traders close their positions on the same day, they closely monitor stock price movements. Long-term investors, on the other hand, must regularly examine the performance of their stocks and stay current on the news of the firm whose stocks they have purchased.
Skills and Traits
Both tactics necessitate self-control. Losses might result from a lack of discipline and emotive decisions.
Intraday traders are constantly on the go and must make quick decisions. Profits must be made by taking advantage of tiny price changes. Long-term investors, on the other hand, must be patient for their equities to perform. When a stock performs poorly, many investors sell it, but this results in a loss. To make a good profit, you must own stocks for a long time, such as 7-10 years or more.
Difference between intra-day vs long-term investment
Holding period
Long-term equities are kept for several years, and short-term changes have no bearing on your investment decision. In this case, the holding period can range from two years to several decades. In contrast, in intraday trading, no position is kept open at the end of the trading day. A holding time could last anything from a few minutes to several hours.
Capital Growth
The trader will exit his intraday stock position when the price moves in the desired direction. For example, if you bought 100 ABC Limited shares at INR 50 and the price rises to INR 55, you will sell the shares and pocket the profit. Similarly, you will reduce your loss if the price falls, by using instruments such as stop loss.
Short-term price swings, on the other hand, have no bearing on your selection while making long-term investments. Stocks are held for numerous years, allowing you to accumulate wealth.
Risked Involved
Both intraday trading and long-term investing have associated hazards. However, the risks are larger in day trading because price volatility can be significant in just a few hours. Because long-term equities are not affected by daily market movements, the risks associated with long-term investments are minimal. Investors have the opportunity to build wealth through dividends and price appreciation over time.
Art versus skill
Technical skills are required for day traders to assess and research market movements. Furthermore, intraday trading is linked to market psychology. Long-term investing, on the other hand, necessitates the ability to pick strong and reliable stocks. Here, investment decisions are primarily based on the business model, financial strength, and company philosophy.
Investor profile
Traders aim to potentially gain bigger earnings from the daily price swings. However, if you miss the appropriate timing here, you could suffer significant losses. Price volatility during trading hours is used to identify intraday stocks. Long-term investors, on the other hand, do not rely on trends and instead invest based on the fundamentals and value of the firm over time. They keep the shares patiently until the desired price levels are reached.
Pros and Cons of Intraday
Pros of Intra-day Trading
- Significant profits can be made in a shorter amount of time when trading intraday.
- You need a lower principal amount and gain from margins.
- You do not have to commit to long-term investment, allowing you to trade more frequently for bigger returns.
- Most reputable brokers, such as Mastertrust, provide margin trading on intraday stocks, giving you more power with your money.
Cons of Intra-day Trading
- Price volatility raises the possibility of losing money.
- Knowledge of technical analysis is required and you cannot rely on suggestions received from others.
Pros and Cons of long-term investing
Pros of long-term Trading
- Historically, when you invest in the equity market for a longer length of time, you can get returns that are higher than the rate of inflation, allowing you to accumulate wealth over time.
- Long-term stocks benefit from economic expansion, which increases revenue through increased consumer demand, implying that their share price will rise.
- Long-term investing not only delivers capital growth through price appreciation but also allows you to earn higher returns through dividends paid on a regular basis.
- It is now relatively simple to invest in stocks for the long term through a stockbroker or internet platforms.
Cons of long-term investing
- There is an inherent danger of losing the principal if the firm does not perform as expected, causing the share price to fall.
- Share values fluctuate from minute to minute. Many times, investments are made based on emotions rather than on fundamentals.
- Long-term investing entails a lengthy holding period of three to five years or more. This also implies you won’t be able to leverage your money in order to generate larger profits from other options.
Conclusion
Before you decide on a plan, consider the following essential factors. If you have time every day, intraday may be a possibility for you. If you don’t want the hassle of tracking daily market moves, opt for long-term investing. Many people invest their money using both ways. Finally, the decision is all yours!